MONTREAL, QUEBEC--(Marketwire - Jan. 12, 2011) - Quebec's economic growth is expected to moderate in the coming year, although employment is continuing to strengthen, according to the Provincial Monitor report released today by BMO Capital Markets Economics. Real GDP growth of 2.9 per cent in 2010 is likely to fall to 2.5 per cent in 2011, as a result of fiscal restraint and a strong currency.

"Total employment has recovered all of the jobs lost during the recession, and should remain stable," said Robert Kavcic, Economist, BMO Capital Markets. "The jobless rate, at 7.6 per cent in November, is now below that of Ontario and all of Atlantic Canada, and running in-line with the national rate. This is a notable shift for a province that has historically seen a relatively high rate of joblessness."

Fiscal stimulus was a major factor supporting Quebec's economy through the recession, but that support should begin to fade next year. Program spending in the province is projected to grow at little more than 2 per cent per year through fiscal 2013/2014, a marked slowdown from 5 per cent-plus growth over the past five years, while a just-implemented 1 percentage-point QST hike (with another coming on January 1, 2012) will weigh on consumer spending.

"While the strong Canadian dollar will be a drag on growth in Quebec's export and manufacturing sectors, it nonetheless provides an opportunity for Quebec businesses to invest in their operations by purchasing machinery and equipment," said Victor Pellegrino, Vice-President, Commercial Banking, Metropolitan Montreal, BMO Bank of Montreal. In so doing, businesses will be able to boost productivity and enhance their competitiveness."

The Government of Quebec updated its fiscal 2010/2011 deficit projection, and is now expecting a $4.6 billion shortfall, versus the Budget estimate of $4.5 billion. The downgrade is mostly the result of higher expenses related to pension valuation and a $100 million increase in the contingency allowance to $400 million. "At about 1 per cent of GDP, the deficit remains relatively small," noted Mr. Kavcic. "Quebec continues to project a return to balance in fiscal 2013/2014."